Statement Summary
The NYSE American LLC has filed a proposed rule change to allow Flexible Exchange Options (FLEX Options) on certain Exchange-Traded Funds (ETFs) holding bitcoin, specifically the Grayscale Bitcoin Trust ETFs and the Bitwise Bitcoin ETF. This aims to enhance trading flexibility and risk management for investors, permitting options trading while maintaining an aggregated position limit of 25,000 contracts to mitigate potential market manipulation. The proposed amendment seeks to increase competition in the options market and attract activity away from over-the-counter products, thereby enhancing market transparency. The Exchange will provide safeguards through existing surveillance systems to monitor trading and prevent fraudulent activities, with plans for implementation within 60 days post-approval.
Original Statement
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102996; File No. SR- NYSEAMER-2024-78]
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend Certain Rules Related to Flexible Exchange Options
May 5, 2025.
Pursuant to Section 19(b)(1)1 of the Securities Exchange Act of 1934 (“Act”)2 and Rule 19b-4 thereunder,3 notice is hereby given that, on April 25, 2025, NYSE American LLC (“NYSE American” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons.
Self-Regulatory Organization’s Statement of the Purpose
The Exchange proposes to amend Rules 903G and 906G to permit FLEX Options on certain ETFs that hold bitcoin. This Amendment No. 1 supersedes and replaces the original filing in its entirety. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room.
Proposal Overview
The Exchange proposes that options on each Fund trade as FLEX Equity Options and would require the aggregation of any FLEX and non-FLEX positions in the same underlying Fund for purposes of calculating position and exercise limits as outlined in Rules 904 and 905. Specifically, the position and exercise limits are set at 25,000 contracts, as stated in the relevant rules, which is viewed as the lowest available limit. This measure is aimed at preventing potential market manipulation.
The proposal also notes that other exchanges, such as Nasdaq Phlx, have initiated similar offerings. The participation of ETFs like GBTC, BTC, and BITB in this trading framework is designed to enhance competitive offerings in the market.
Implementation
The Exchange will announce the implementation date by Trader Update within 60 days of the rule approval.
Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”) and furthers the objectives of Section 6(b)(5) in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to remove impediments to the perfect mechanism of an open market. By allowing FLEX Fund Options, the Exchange aims to increase order flow and risk management tools for investors.
Comments and Feedback
Comments concerning the proposed rule change may be submitted electronically or via paper. Interested persons can send their input by email, ensuring to include file number SR- NYSEAMER-2024-78 in the subject line or write to the Secretary of the Securities and Exchange Commission.
The Commission will review all submissions to ensure they address the relevant considerations regarding the introduction of FLEX Fund Options and their implications for market conduct.
